Today, in close partnership with our fellow banking regulators, we are ordering three subsidiaries of the American Express Company to put some $85 million back into the wallets of consumers. The subsidiary companies will modify various credit card practices found to be illegal, make full refunds to approximately 250,000 customers, and pay $14.1 million in fines.
Over the course of a long, multi-agency investigation, we found that at every stage of the consumer experience − from advertising to enrollment to payment to collection – these American Express subsidiaries had violated various consumer financial laws.
The Federal Deposit Insurance Corporation (FDIC), along with the Utah Department of Financial Institutions, uncovered the problems during a routine examination in February 2011. After the Consumer Financial Protection Bureau (CFPB) opened its doors for business five months later, we inherited many of the consumer protection functions of the FDIC, and the case was passed on to us.
Upon further investigation, we learned that the problems were widespread.
Our investigations found that when consumers were shopping for credit cards, one American Express company sent potential customers misleading credit card offerings in the mail. When consumers applied for cards, the same company engaged in practices that unlawfully discriminated on the basis of age. In connection with consumers paying their bills, American Express companies violated consumer financial laws. For example, we found that these American Express companies charged consumers excessive late fees.
And we found that all three American Express subsidiaries − American Express Centurion Bank and American Express Bank, FSB, along with their parent company and affiliate, American Express Travel Related Services Company, Inc. – misled people into paying off old debt by telling them that it would be reported to the credit bureaus and their credit scores would improve. In fact, the debt was not reported to the credit bureaus and in any event it was so old that it may not have appeared in credit reports anyway.
So today, multiple agencies are joining together to require the American Express companies to refund money to consumers, pay fines, and change their practices. This includes not only the CFPB and the FDIC, but also the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency. The State of Utah will also be taking its own related action through its Department of Financial Institutions.
We are ordering the American Express subsidiaries to make a full refund of approximately $85 million to consumers who were harmed. The American Express subsidiaries will identify those consumers, notify them, and make sure they get their money back. The burden will not fall on customers to pursue their refunds. To ensure compliance with all terms of the agreements, the companies will hire independent auditors to verify that the orders are being carried out.
Under the non-monetary terms of the Consent Order with American Express Centurion Bank, the bank is required to stop deceiving consumers by falsely promising a rebate or a points feature on credit cards or any other card. The company will have to ensure that it does not unlawfully discriminate based on age in deciding who qualifies for a credit card. And the bank and American Express Bank, FSB will properly report disputes to credit bureaus and make sure that cardholders are informed of their rights. They will also stop charging consumers the illegal late fees.
The Bureau is also issuing a consumer advisory today. The advisory will inform consumers who were harmed about how they will benefit from this action and how they will receive money, if they are eligible.
We share the same task with these companies themselves: to make sure that every business is following the rules. Consumers expect and deserve that. We will continue to work steadily toward this objective.